By Christopher M. Matthews
Exxon Mobil Corp. posted its third consecutive quarterly loss
for the first time on record Friday and disclosed that it may write
down the value of natural-gas assets worth as much as $30 billion,
as the coronavirus pandemic continues to pressure the world's
biggest oil companies.
The Texas oil giant reported a loss of $680 million in the third
quarter compared with a profit of $3.17 billion during the same
period last year.
Exxon Chief Executive Darren Woods invested heavily before the
pandemic to grow Exxon's oil and gas production by 2025. That
decision has backfired as commodity prices plunged this year,
forcing the company to make substantial cuts and painful choices
about where to invest.
"We are on pace to achieve our 2020 cost-reduction targets and
are progressing additional savings next year as we manage through
this unprecedented down cycle," Mr. Woods said.
Rival Chevron Corp. on Friday posted a third-quarter loss of
$207 million compared with a profit of $2.58 billion in the same
quarter last year. Royal Dutch Shell PLC reported a profit of $546
million Thursday, while BP PLC lost $307 million.
The results make clear that the pandemic continues to weigh on
the industry despite a modest economic recovery and rebound in
demand for oil and gas. New lockdowns in Europe are conjuring fears
that rapidly climbing virus cases could mean a prolonged global
"I think the industry would say this is their nightmare
scenario," said Regina Mayor, who leads KPMG's energy practice.
On Thursday, Exxon said it could cut as much as 15% of its
global workforce, or about 14,000 jobs, as the struggling oil
company tries to cut costs and survive the Covid-19 downturn. In
all, big oil producers and services firms are collectively shedding
more than 50,000 jobs.
"The world's economy continues to operate below pre-pandemic
levels, impacting demand for our products which are closely linked
to economic activity," Chevron CEO Michael Wirth said Friday.
Lower oil and gas prices brought on by the pandemic and
uncertainty over the pace of the transition to lower-carbon energy
have caused major oil companies to question the value of their
Exxon had stood out among its peers this year for resisting
large write-downs. Its disclosure Friday that it could take a huge
one comes after months of pressure from analysts and others who
argued it needed to do so.
Shell said earlier this year it would write down the value of
its assets by up to $22 billion because of lower energy prices and
BP is writing down as much as $17.5 billion. Last year, Chevron
said it would cut the value of its assets by $10 billion.
Exxon Senior Vice President Andrew Swiger said on an investor
call Friday that it is strategically evaluating which assets are
worth investing in under current market constraints and could move
to sell some its North American dry gas assets with a carrying
value of $25 to $30 billion, potentially resulting in an
Spokesman Casey Norton said Friday that the impairment hadn't
been completed and would be considered by the board later this
year. Mr. Norton said the impairment doesn't indicate changes to
Exxon's long-term price views and isn't a reaction to short-term
If Exxon were to write down close to the full value of those
assets, it would be among the largest-ever charges taken by an
oil-and-gas company, according to analysts.
The company also said it would reduce its capital expenditures
to between $16 billion and $19 billion next year. Exxon had planned
to spend $33 billion in 2020, but cut its capital expenditures to
$23 billion after the pandemic took hold.
Paul Sankey, an analyst who has long called for Exxon to write
down the value of its shale gas assets, said the impairment was
"It never made sense that there wasn't the mother of all
write-downs," said Mr. Sankey, the lead analyst at Sankey
As The Wall Street Journal previously reported, several oil and
gas accounting experts have alleged that Exxon's reticence to
adjust the value of assets on its balance sheet amounts to
accounting fraud in a series of complaints filed to U.S.
authorities. By their estimates, Exxon should have taken a $44
billion impairment loss this year and a corresponding $56 billion
reduction of its reported assets on its balance sheet in the second
The group, which filed a whistleblower complaint with the
Securities and Exchange Commission, has singled out Exxon's
acquisition of XTO Energy Inc., a natural-gas driller it purchased
for $31 billion a decade ago, along with other assets.
Exxon has rebutted the criticism of its write-down practices,
saying that the company is in compliance with accounting rules and
SEC regulations about disclosures to investors.
Exxon has said it is able to avoid write-downs because it is
extremely conservative in initially booking the value of new fields
and wells and doesn't respond to short-term commodity-price
fluctuations. Before 2016, Exxon had never recognized an asset
impairment under U.S. accounting rules implemented in the
Despite the capital constraints imposed by the pandemic, Mr.
Swiger said Friday Exxon would continue to maintain its hefty
dividend, and that its long-term plan to grow production is
unchanged because energy demand will ultimately grow.
"While questions remain around future demand recovery, one thing
is certain," Mr. Swiger said. "Current conditions cannot continue,
supply and demand will eventually meet."
Exxon's production increased to 3.7 million barrels a day, up 1%
from the second quarter but down nearly 6% from the same period
last year. Exxon's oil and gas production unit posted a $383
million loss in the third quarter, while its downstream and
refining business lost $231 million in the quarter.
Chevron's production unit eked out a profit of $235 million,
producing 2.83 million barrels a day in the third quarter, down 7%
from a year ago. Its downstream earnings fell to $292 million from
Chevron Chief Financial Officer Pierre Breber said on a call
with analysts Chevron would continue to cut costs next year and
expects to spend around $10 billion in capital expenditures in
"We're in an economy that's impacted by pandemic, and demand for
our products is below normal levels in pre-pandemic levels," Mr.
Breber said. "We are trying to sustain the long-term value of the
Dave Sebastian contributed to this article.
Write to Christopher M. Matthews at
(END) Dow Jones Newswires
October 30, 2020 13:33 ET (17:33 GMT)
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